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Thus, there was no guarantee that the television company could
keep the deposit.
In Buchner v. Commissioner, T.C. Memo. 1990-417, the
taxpayer operated a direct mail advertising service and required
its clients to make deposits into "postage impound accounts" to
cover estimated postage expenses. In the event that a client
failed to reimburse the taxpayer for postage, money would be
withdrawn from the client's account. When a client terminated
its relationship, any balance in the account not so applied was
refunded. We held that the deposits were not income to the
taxpayer under the "complete dominion" test, because so long as
clients paid their monthly bills, no portion of the deposits
would be applied to payments for services and retained by the
taxpayer.5
Petitioners’ attempt to apply the teaching of Indianapolis
Power & Light to the cases at hand is self-contradictory and does
not support their position on the issues in dispute. If the
reserves were nontaxable deposits by reason of the Dealerships'
contingent liability to refund them on demand, then they would
have ceased to be deposits and become taxable income at such time
5 Cf. Kansas City S. Indus., Inc. v. Commissioner, 98 T.C.
242 (1992) (railroad company did not realize income upon
collection of deposits from shippers for estimated costs of
sidetrack construction which railroad company agreed to refund,
to the extent deposits exceeded actual construction costs,
through a rebate formula based on shipping volumes).
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